BOT upbeat on economy after coup
'Investor confidence remains strong'
Foreign capital continues to flow into Thailand despite the September 19 coup, reflecting foreign investors' confidence that the military takeover will not harm the economy, according to the central bank.
Bank of Thailand (BOT) deputy-governor Bandid Nijathaworn yesterday said the secure capital flow was evidence of the baht's stability since last Thursday after its initial, knee-jerk slump to Bt37.95 per dollar shortly after the coup.
Foreign investors rushed in to snap up Thai shares, purchasing a net total of Bt7.51 billion worth of Thai stocks Thursday and Friday. Meanwhile, retail and local institutional investors dumped Bt3.7 billion and Bt3.8 billion worth of stocks over the two days respectively.
Piyasvasti Amrananda, chairman of Kasikorn Asset Management, said the fund company's clients were not selling shares following the coup. He said given the stable outlook, the Thai economy had a chance of spiking next year instead.
"Once there is a respected provisional government, everything will proceed as planned, including the mega-projects and the 2007 budget," he said, adding that Thailand's economic fundamentals are set to improve due to the
stable baht and falling oil prices, which would reduce inflationary pressure.
Yesterday, oil prices fell below US$60 (Bt2,248) a barrel for the first time in six months amid signs of growing petroleum inventories and easing worries about potential supply disruptions. Light, sweet crude for November delivery fell as low as $59.79 a barrel in Asian electronic trading on the New York Mercantile Exchange, the lowest price since March 13, before rising to $60.03, down 52 cents on Friday's close.
The SET composite index, following Wednesday's trade suspension, closed with a lower-than-expected 1.42 per cent drop on Thursday, well above the 7.25 per cent fall witnessed when the National Peacekeeping Council took control of the country 15 years ago. Foreign brokers have expressed mixed views over last Tuesday's bloodless coup, but most have said that it will benefit the Thai economy.
Thai shares yesterday edged up 0.7 per cent following a sharp, two-day fall. Turnover was moderate at Bt13.71 billion.
"The baht was stable last week as foreign investors bought Thai shares, indicating that capital inflow remains normal," said Bandid, adding that foreign investors used the currency's initial fall as an opportunity to buy cheap stocks.
Investors have since shifted money into the region due to a vigorous economy and cheap stocks rather than for speculative purposes, said the deputy-governor. He said the BOT had found that the reaction in the foreign exchange market to the coup was limited and that transactions in the foreign-exchange and money markets had returned to normal yesterday, which had benefited the private sector.
The baht fluctuated between Bt37.30 to Bt37.38 before closing at
Bt37.50 without any new factors affecting the market yesterday. It closed at Bt37.38 on Friday after moving between Bt37.27 to Bt37.59 on Thursday and Friday.
Bandid said the bond market was also normal. The three-day BOT bill, worth Bt5 billion, was quoted at 4.79 to 5 percent, while yields on medium and long-term bonds have gradually declined in line with foreign markets.
The money market was unaffected, with the inter-bank rate rising slightly by 2 to 3 basis points, he said, adding that excess liquidity in the credit market was at around Bt300 billion-Bt400 billion.
Bandid said that if the budget was approved and disbursed before schedule without being significantly changed it would benefit the economy next year.
"Domestic spending will benefit from the government's budget, which will be completed faster than expected. This will boost the overall economy," he said.
Prior to the coup, the BOT had forecast that disbursement of the budget would be delayed by six to nine months.
The BOT predicts economic growth of 4 to 5.3 per cent next year.
Bandid said the expected budget deficit of 1.5 to 2 per cent of GDP was at an acceptable level.